A question that comes up regularly relates to the start date of the lease and your obligations when buying a leasehold property. I guess your first thought might be why is his important?
If I start with the development process it will give a context on the matter. A development finishes with what is called practical completion. This is when the contractor has finished his work and the developer can complete sales and collect in the purchase prices. This triggers the start time for snagging, warranties, NHBC certificates, completing leases. Obviously anyone who has made a reservation on a property prior to practical completion will complete their purchases at this point and then move in accordingly.
If there are any homes not sold they will sit empty until they are sold, obviously. However, the date of practical completion will trigger the start date for the lease, the start date for warranty periods, for snagging periods, for NHBC or similar. It is therefore important when looking for your home to be aware of this and what impact or effect it could have.
You may find yourself with a tight timeline to get any snagging items dealt with that occur. If there are any sort of review periods based on the start date of the lease then these will mean the impact of that review will be closer when you buy than the full review period if you had bought at the start of the lease.
So as an example a block of 50 flats is built and practical completion is on 3rd April 2015. The term of the lease typically runs on dates that are called quarter days which are either 25th March, 24th June, 29th September, 25th December or 1st January, 1st April, 1st July, 1st October. So with our example the start of the term would be set as 25th March 2015. The start of the term cannot be after the date the lease is completed on with their being an Agreement to Lease, a technical point but it is the reason.
If 30 of the 50 flats are pre sold before the practical completion them 30 home owners will get their leases and the terms start 25th March 2015. For the other 20 flats as and when they sell their term will also start on 25th March 2015; even if the flats take a long time to sell and someone were to buy in April 2017.
So it is possible you can find yourself buying a home where the first two years of the lease have already passed by. The challenge of this can be in relation to any snagging items which need dealing with or protection from NHBC. It is essential that all new home owners know what they are taking on and understand their rights and responsibilities. A key part to that is making sure your lawyer gives a clear report on title that explains all matters.
It should especially make clear when the lease starts and what the impact and effect of that is. One thing to remember in all your dealings with property when buying and selling. The estate agent is there for the seller and it is your solicitor. So if you want something explained, then ask your lawyer. If anything is not clear then get your lawyer to clarify and explain.
Looking for ways that you can find out about a leasehold home can be invaluable to understanding your commitments and making sure you are comfortable with them. Of course the Leasehold Advisory Service has a wealth of guides and information on the website is there to help you and our advisers are always on the end of the phone to answer your specific query.
Buying your home is the most exciting thing and ensuring that you do all you can to be well informed is the most sensible thing to do. Of course seeing past the excitement to the practicalities can be challenging. As dull as it sounds it is one of those essentials.
Therefore when searching for your home, make sure that you know the right questions to ask, obtain the basic details and make sure you are comfortable with the rights and responsibilities you are taking on. Good luck in your searches and if you are prepared then unforeseen challenges should be avoided. Finding out all you can in advance will pay dividends in the long run.
Non Exec Chair Leasehold Advisory Service
18 April 2016